RELIANCE INDUSTRIES LIMITED
Management Control System and Financial Analysis Submitted By Manoj S Rengar
Submitted To Prof. Vivek Raina
2011
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XCELLON INSTITUTE SCHOOL OF BUSINESS
A Project Report On Reliance Industries Limited
Submitted By Manoj S Rengar M0007
Submitted To Prof. Vivek Raina Xcellon Institute School of Business
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A Project Report On Reliance Industries Limited
Submitted By Manoj S Rengar M0007
Submitted To Prof. Vivek Raina Xcellon Institute School of Business
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Acknowledgement Words are indeed inadequate to convey my deep sense of gratitude to all those who have helped me in completing this project to the best of my ability. Being a part of this project has certainly been a unique and a very productive experience on my part. I would also like to thank my professor and project – coordinator, for assigning me a project of such a great learning experience and acquainting me with real life project of Reliance Industries limited. I am very grateful to project in the for their useful guidance and advise.
Who has given me the opportunity to do this and very thankful to all
This project would not have been successful without the help of Last but not least I would like to thank the entire who have directly or indirectly helped me with their moral support for the completion of my project. pro ject.
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Table of Content Sr.No
Particular
Page. No
1
Executive Summary
5
2
Introduction
7
3
History
13
4
Management of Reliance Industries
35
5
Organization Structure
37
6
Management Control System
42
7
Financial Analysis
47
8
Comparative Analysis of RIL with other company
62
9
Balance sheet comparison
64
10
Cash Flow of Reliance Industries
66
11
Accounting System
68
12
Conclusion
71
13
Bibliography
72
4
Executive Summary The Reliance Industries India group is India's largest private sector conglomerate. The Reliance Industries Limited was started by the legendary
Late Dhirubhai H. Ambani .
After a humble start
in the late 1970's as a textile company its success skyrocketed and now covers almost all industry verticals. The Reliance Industries India group is India's largest private sector conglomerate. The Reliance Industries Limited was started by the legendary
Late Dhirubhai H. Ambani .
After a humble start
in the late 1970's as a textile company its success skyrocketed and now covers almost all industry verticals.
In this report first I have given the general information regarding the company. It includes the introduction and history of company; its disinvestments, milestones, board of directors, quality policy, financial position of the company, and the products. I have also given the comparative analysis of its group companies and it various divisions with its net revenue and briefly describe its functional department of the company like Production department, stores, finance department, marketing department and human recourse department etc. I had also described its management control briefly by showing its organization chart and structure with future strategy which they going to implement in future. In the second part, I have focused on my core project regarding the procedure followed for the cash and bank management at RIL and its analysis with ration and interpretation. In the end, the conclusion and the bibliography are given. The report totally depends on the secondary data and it may be possible that the data from which the report is made may not appear in the report because some data is confidential for the company. From given financial analysis I come to know that this year performance of Reliance is decrease compare to last year but in the balance sheet it was seen that sales was increase but on the other side there are some other cost of paying the interest because amount of debt was increase this year and profit was decrease this was I assumed on the basis of ratio analysis by comparing with last three year performance.
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Reliance Industries “GROWTH IS LIFE”
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Introduction The Reliance Industries India group is India's largest private sector conglomerate. The Reliance Industries Limited was started by the legendary
Late Dhirubhai H. Ambani .
After a humble start
in the late 1970's as a textile company its success skyrocketed and now covers almost all industry verticals. Today, Reliance Industries generates revenues in excess of USD 44 billion and exports products worth USD 7 billion to more than 100 countries. The Reliance Industries Limited is a 'Fortune Global 500 company' and employs more than 25,000 professionals across the world. Reliance enjoys leadership in polyester yarn & fiber produce and is among the top 5 players in the world in major petrochemical products. Reliance Industries Limited holds largest Oil & Gas exploration area in India and has achieved 74 % success rate in terms of discoveries. Reliance enjoys a preeminent position in terms of its contribution to the Indian economy with revenues equal to 2.6% of India's GDP. It also contributes 7.7% of India's total exports, 7.9% of the Government of India's indirect tax revenues and close to Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain. The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail and special economic zones. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. Major Group Companies are Reliance Industries Limited (including main subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure Limited. Reliance Industries India has been a pioneer in the equity culture cult and is highly respected for its corporate transparency, deep market penetration ability, innovations and above all for its ability to generate 'products & services' for all sections of the society. 7
Its guardianship for India Inc. stupendous growth has been felicitated with no of awards in areas like Quality, Energy Management, Health Safety & Environment, Exports and Retail & Franchising. It also bagged 'Golden Peacock Award' for Corporate Management in 2005-2006 and enjoys high corporate ranking in Fortune Global 500 Company.
THE LEGENDARY DHIRUBHAI .H. AMBANI Dhirajlal Hirachand Ambani , also known as Dhirubhai (28 December 1932, - 6 July 2002) was
an Indian rags-to-riches business tycoon who founded Reliance Industries in Mumbai. Ambani took his company (Reliance) public in 1977, and by 2007 the combined fortune of the family (sons Anil& Mukesh and daughters Dipti & Nina) was 60 billion dollars, making the Ambanis the richest family in the world. He moved to Aden, Yemen, when he was 16 to work with A. Besse & Co. and eventually returned to India and started "Majin", which was to import polyester yarn and export spices, in partnership with his cousin, Champak Lal Damani. Dhirubhai was a known risk taker and he believed in building inventories, anticipating a price
rise, and making profits. Ambani's net worth was estimated at about Rs. 10 lakh by late 1970s. He is credited with starting the equity cult in India . More than 58,000 investors from various parts of India subscribed to Reliance's IPO in 1977. In 1986 The Annual General Meeting of Reliance Industries was held in Cross Maidan, Mumbai and was attended by more than 350,000 shareholders and the Reliance family. In 1982, Reliance Industries came up against a rights issue regarding partly convertible debentures. It was rumoured that company was making all efforts to ensure that their stock prices did not slide an inch. Sensing an opportunity, a bear cartel which was a group of stock brokers from Calcutta started to short sell the shares of Reliance. To counter this, a group of stock brokers till recently referred to as "Friends of Reliance" started to buy the short sold shares of Reliance Industries on the Bombay Stock Exchange. After this incident, many questions were raised by his detractors and the press. In response, the then finance minister, Pranab Mukherjee informed the house that a Non-Resident Indian had invested up to Rs. 22 Crores in Reliance during 1982-83. The interesting factor was that all the promoters or owners of these companies had a common surname Shah. An investigation by the Reserve Bank of India in the incident did not find any unethical or illegal acts or transactions committed by Reliance or its promoters Over time, Dhirubhai diversified his business with the core specialisation being in petrochemicals and
additional
interests
in telecommunications, information
technology, energy, power, retail, textiles, infrastructure services, capital markets, and logistics. 8
He has been accused of acting unethically; having manipulated government policies to suit his own needs, and has been known to be a king-maker in government elections. Although most media sources tend to speak out about business-politics nexus, the Ambani house has always enjoyed more protection and shelter from the media storms that sweep across the country. A film, Guru (2007) directed by Mani Ratnam, alleged to be inspired by the life of Dhirubhai Ambani was released on 12 January 2007.
Reliance after Dhirubhai
The Reliance Empire was split between the Ambani brothers, Mukesh Ambani getting RIL and IPCL & his younger sibling Anil Ambani heading Reliance Capital, Reliance Energy and Reliance Infocomm. The entity headed by Mukesh Ambani is referred to as the Reliance Industries Limited whereas Anil's Group has been renamed Anil Dhirubhai Ambani Group (ADAG).His daughter Nina Kothri along with her husband B H Kothari started ‘ Java green’ in 2004, a coffee retail chain along with Reliance’s Web World stores.
MUKESH AMBANI’S GROUP OF BUSINESSES
Mukesh Ambani owns two main industries namely:
Reliance Industries Limited
Indian Petrochemical Corporation Limited
The following are the categories of businesses that are being dealt with:
Exploration and Production
Petroleum refining and marketing
Petroleum
Textiles
Retail
The major associates and subsidiaries of Reliance Industries Limited are:
Reliance Petroleum Limited
Reliance Retail Limited
Reliance Global Management Services (P) Ltd
Reliance Biopharmaceuticals
Ranger Farms Ltd
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Reliance Engineering Associates (P) Ltd
Reliance Oil & Gas Find (Petrochemicals Business)
Reliance Petroleum Limited (RPL)
Reliance Petroleum Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL), one of India's largest private sector companies. RPL benefits from a strategic alliance with Chevron India Holdings Pte Limited, Singapore, a wholly owned subsidiary of Chevron Corporation USA (Chevron), which currently holds a 5% equity stake in the Company. Refining activities of Reliance Industries Limited are carried out at the Jamnagar refinery complex with refining capacity of 27 million tonnes per annum (540,000 barrels per day). The Jamnagar Refinery is a private sector crude oil refinery owned by Reliance Industries Limited in Jamnagar, India. The refinery was commissioned on 14 July 1999 with an installed capacity of 661,000 barrels per day. It is the largest Greenfield refinery in the world. Jamnagar has emerged as the ‘Refining Hub of the World’ with the largest refining complex with an
aggregate refining capacity of 1.24 million barrels of oil per day in any single location in the world. The refinery can process a wide variety of crudes- from very light to very heavy (from 18 to 45 degree API) and from sweet to very heavy (with sulphur content from 0 to 4.5%). With an annual crude processing capacity of 580,000 barrels per stream day (BPSD), RPL will be the sixth largest refinery in the world. The polypropylene plant will have a capacity to produce 0.9 million metric tonnes per annum. RPL was awarded the ‘International Refiner of the Year’ award in the year 2008 and it runs a
nearly zero-emission refinery. Reliance Retail Limited
Reliance is gearing up to revolutionize the retailing industry in India. Towards this end, Reliance is aggressively working on introducing a pan-India network of retail outlets in multiple formats. A world class shopping environment, state of art technology, a seamless supply chain infrastructure, a host of unique value-added services and above all, unmatched customer experience, is what this initiative is all about. Ensuring better returns to Indian farmers and manufacturers and greater value for the Indian consumer, both in quality and quantity, will be an integral feature of this project. By creating value at all levels, the project boasts of a seamless supply chain infrastructure, unprecedented even by world standards. Through 10
multiple formats and a wide range of categories, Reliance is aiming to touch almost every Indian customer and supplier. RIL's Retail Project will be through the following companies:
Reliance Fresh Reliance Footprint Reliance Time-Out Reliance Digital Reliance Wellness
Reliance Trendz Reliance Autozone Reliance Super Reliance Mart Reliance i-store
Reliance i-store Reliance Home Kitchens Reliance Jewel
Reliance Retail continues to consolidate its presence and operations with more than 900 stores in over cities where it is operational today. E- Office Planet Private Limited, Reliance’s joint venture with Office Depot has expanded its footprint across India for serving its customers in a better way. Reliance Global Management Services (P) Limited
Reliance Global Services (P) Ltd is one of the fast growing IT solutions and services provider with offices in USA, Hyderabad-India, delivering best-in-class services to help clients reduce costs, enhance organizational flexibility, and improve business and IT performance. They have proven capabilities across various industry verticals. Their wide spectrum of solutions and services encompass ERP specialized in SAP Custom application development, Application maintenance and support, Management-consulting services through Contract staffing enabled with in-house competency development. Reliance Global management team comprises of ace professionals, each with years of managerial experience, rich industry knowledge and multidimensional skills. They form a formidable think tank with their industry knowledge, understanding of client requirements, processes and key client backgrounds. Reliance Biopharmaceuticals
Reliance Life Sciences (Rabale, India), a Reliance Industries subsidiary, is building a protein manufacturing facility at the Dhirubhai Ambani Life Sciences Centre at Rabale, near Mumbai. The company will invest more than Rs. 9 billion ($200 million) to build the complex, which will be Reliance's first such facility. It will use mammalian cell and microbial fermentation technology to produce proteins. Completion is due at year-end, and FDA validation is expected to follow eight months later. The protein plant will have initial capacity for 10,000 litres of mammalian cell culture and 1,000 litres of microbial cell culture.
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Ranger Farms
Reliance Industries is likely to turn their consumer retail project Reliance Fresh into a separate entity. It could be added to the Ranger Farm brand name. This particular division of the company deals in food, fruits and vegetables and consumer products. Reliance Engineering Associates Private Limited (REAL)
Reliance Engineering Associates Private Limited (REAL) is a Reliance Group Company dedicated to Engineering procurement and construction of various projects in both reliance group companies and other industries. Their services include part design for moulding, mould design, prototype and production tooling, pre-production prototyping, and full-scale manufacturing of precision thermoplastic and thermo set plastic parts. These parts are used in a wide range of demanding and critical end-use applications. Building on this core expertise, Reliance Engineering provides contract manufacturing services for original equipment manufacturers. This service includes procurement to rigid specifications and build-to-print assembly of low to moderate volume products. Reliance Petrochemicals
Polymer (PP, PE and PVC) production volumes decreased by 9% to 3,076 KT. Production was lower primarily on account of planned shutdown of Polypropylene (PP) plant at Jamnagar in October 2008 to improve product swing capability and yield. RIL produced 1,755 KT of ethylene and 696 KT of propylene, a decrease of 7% each over the previous year primarily due to lower Propane cracking. Polyester (PFY, PSF and PET) production volume decreased by 2% to 1,534 KT. RIL has maintained its focus on specialty products which account for 55% of PSF and 38% of PFY production. RIL’s fibre intermediates (PX, PTA and MEG) production decreased by 3% to 4,583 KT during the year. Revenue for the petrochemicals segment for the year decreased marginally from Rs 53,000 crores to Rs. 52,767 crores (US$ 10.4 billion). Indian Petrochemicals Corporation Limited (IPCL)
RIL had acquired erstwhile public sector petrochemical company in 2002 by successfully bidding for government equity and become a strategic partner in IPCL after which Reliance’s controlling
share was 47.3%. Reliance Industries formally assumed control of Indian Petrochemical Corporation Ltd (IPCL) with Mukesh Ambani as the chairman of the company in June 5, 2002. IPCL, the pioneering petrochemical company in India, was managed by a board nominated by Government of India till June 4, 2002. Later, the government divested 26 per cent of the 12
company’s equity shares in favour of Reliance Petro investments Ltd through an open,
transparent and competitive bidding process. Effective April 1, 2005, the six polyester companies namely Apollo Fibres Limited (AFL), Central India Polyesters Limited (CIPL), India Polyfibres Limited (IPL), Orissa Polyfibres Limited (OPL), Recron Synthetics Limited (RSL) and Silvassa Industries Private Limited (SIPL) have been amalgamated with IPCL. The two brothers were engaged in a battle over control of the, then, Rs 90,000- crores Reliance Empire after their father’s demise and by Jan 2005, RIL Chairman Anil Ambani quit as director
and Vice-Chairman of the Reliance Group Company IPCL Ltd .Anil resigned on the ground that he was unwilling to work on the same board where Anand Jain, a close confidante of Mukesh, was present. Anil is also believed to have complained that Jain was running a “personal vilification” campaign against him, the sources said.
RIPCL to RIL:
The boards of Reliance Industries and IPCL on March 11, 2007 approved the merger between the two companies at a swap ratio of 1:5. This means IPCL shareholders will get one share of RIL for every five held by them. The appointed date of merger of IPCL with RIL is April 1, 2007, subject to approvals from the courts and other regulatory authorities. The name IPCL will disappear when the two merge
Textiles
RIL continues to operate one of the most modern textile complexes in Asia with new investments in design, modern weaving, and state-of-the-art finishing equipments Major growth drivers for VIMAL continued to be retail presence across India, constant innovation in products, cost efficiency and improved customer service. The division continued adding clients in auto textiles and is now a significant supplier to major automobile manufacturers in India. The new product initiatives are:
Fresca anti-microbial and anti-bacterial work-wear apparel fabrics
Home furnishing and auto-textiles
Silk-Amino suiting fabrics
Fire-retardant and water-repellent tent fabrics for defence/ police services
Insect & mosquito repellent nets, as per WHO standards, which will find usage in several areas of the world affected by mosquitoes / insects
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Reliance Oil and Gas Finds
In 2002, Reliance found natural gas in the Krishna Godavari basin off the coast of Andhra Pradesh near Vishakhapatnam. It was the largest discovery of natural gas in world in financial year 2002-2003. On 01 April 2009, Reliance Industries (RIL) commenced natural gas production from its D-6 block in the Krishna-Godavari (KG) basin. The gas reserve is 7 trillion cubic feet in size. Equivalent to 1.2 billion barrels (165 million tonnes) of crude oil, but only 5 trillion cubic feet are extractable. On 2008 Oct 8, Anil Ambani's Reliance Natural Resources took Reliance Industries to the Bombay High Court to uphold a memorandum of understanding that said RIL will supply the natural gas at $2.34 per million British thermal units to Anil Ambani. Reliance's Oil & Gas Find.
RIL Product Mix
Oil & Gas 3%
Chemicals 11%
Fibre Int. 29% Plastics & Int. 34%
Polyester 22%
Fabrics 1%
Sources: http://www.ril.com/html/aboutus/aboutus.html 4th January 2011
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History 1973
On 8th May the company was incorporated in Karnataka state as a public limited company under the name Mynylon Ltd. to manufacture synthetic blended yarns and fabrics, polyester filament yarn, polyester glass shells and color TV picture tubes.
1975
On 28th June this company was converted into a public limited company.
On 11th February 1966 a company by name of Reliance Textiles Industries Pvt Ltd was incorporated in Maharashtra. It established a synthetic fabrics mill in the same year at Naroda in Gujarat.
On 1st July, Reliance Textile Industries Ltd. was amalgamated with Mynylon Ltd.
1977
With effect from 11th March 1st the name of Mynylon Ltd was changed to Reliance Textiles Industries Ltd. The company manufactures synthetic blended yarns and fabrics polyester filament yarn polyester staple fibre chemicals and allied products colour TV glass shells and colour TV picture tubes. The Company's yarns are marketed under various brand names such as Texalit, Textron, Texlene, Poly dyed and polytwist. The company's fabrics are marketed under the brand name VIMAL.
On November Dhirajlal H Ambani and Natvarlal H Ambani along with some other existing shareholders offered for sale at par to the public.28,20,000 equity shares of the Company in order to get the shares of the company listed on the stock Exchange at Mumbai.
1979
During the year Sidhpur Mills Co. Ltd which has an installed capacity of 38,368 spindles and 490 looms was amalgamated with the company.
In terms of the scheme of
amalgamation, the company was to issue and allot for every one equity share of Rs. 100 each of Sidhpur, 2 equity shares of Rs.10 each and one bond of Rs.80 of the company.
15
The Company allotted a total of 1,12,000 No. of equity shares of Rs 10 each and 35,000 11% bonds of Rs 80 each to the shareholders of Sidhpur Mills.
1980
Company was set up Polyestr Filament Yarn Plant at Patalganga in Raigad district of Maharashtra with the financial and technical
collaboration with E.I Du Pont De
Nemours & Co; USA.
The Company received a letter to intent from the manufacture of 10,000 tonnes per annum of polyester filament yarn. Financial and technical collaboration was finalized with E.I. Du Pont De Nemours & Co., U.S.A.
1982
5,50,000 - 13.5% Pref. shares issued as Rights to equity shareholders. 19,20,000 equity shares issued to debenture holders (Series III) as per the terms of that issue. 815 No. of equity shares allotted out of the Rights issue of 1981.
1983
111,56,741 Bonus Equity shares issued in proportion of 3:5. 64,00,000 No. of Equity shares of Rs 10 each issued in part conversion of debs. (iv series) on 30.9.1983. Of these, 24,00,000 shares issued as additional entitlement to debenture holders (iv series) on account of bonus issue.
1984
101,24,675 No. of Equity shares allotted conversion of non-convertible portion of debentures of Series I, II, III and IV of the total value of Rs 7231.92 lakhs in proportion of 1:4 Equity shares of Rs 10 each for every Rs 100 of debentures (100,28,359 shares in 1984 and 96,316 shares in 1985). 53,33,333 No. of equity shares issued (premium Rs 40 per share) on part conversion of `E' Series debentures as on 30.4.1985.Rate of dividend on 13.5% pref. shares increased to 15% effective from 16.5.1984.
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1985
A letters of intent were received for the manufacture of 50,000 tons per annum of high density polyethylene (HDPE) and 1,00,000 tones per annum of poly vinyl chloride (PVC). Technical collaboration agreements were signed with Du Pont for HDPE and with B.F. Goodrich & Co., for PVC. Steps were also taken to set up a project for the manufacture of mono ethylene glycol (MEG), a basic raw material required for the polyester industry. A Collaboration agreement was entered into with Scientific Design Company, New York for this project.
The Company installed an additional capacity of 15,125 tons per annum of polyester yarn.
With effect from 1st October the running business of the Sidhapur unit was taken over by Devti Fabrics Ltd, is a subsidiary of the company.
The name of the company was again changed from Reliance Textiles Industries Ltd to Reliance Industries Ltd with effect from 27th June.
On 30th September Devti Fibres Ltd became a subsidiary of the company. Trishna Investments and Leasing Ltd., Reliance Industrial Investments & Holdings Ltd., Reliance Petroproducts Ltd. also subsidiaries of the Company.
Steps were in progress for implementing a project for the manufacture of purified terepthalic acid with a capacity of 75,000 tonnes per annum in technical collaboration with Imperial Chemical Industries UK and UOP Processes International Inc. USA. This plant was commissioned during the year.
1986
On March a plant for the manufacture of Polyster Staple Fibre was commissioned in technical collaboration with F.I DU Pont De Nemours and Co. USA.
During the same year company set up a project for the manufacture of linear alkyl benzene in technical collaboration with UOP Processes International Inc. USA.
As a measure of diversification the company undertook to set up a project for the manufacture of 50,000 tons per annum of linear alkyl the manufacture of 50,000 benzene in technical collaboration with UOP Processes International Inc. USA.
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1987
Three letters of intent were converted into industrial licenses. Subsequent to 30th June, all these industrial licenses were transferred to Reliance Petrochemicals, Ltd., a company incorporated as a subsidiary of the company.
689,65,480 No. of Equity shares allotted (prem. Rs 62.50 per shares) in conversion of `G' series debs. Out of which 660,30,100 shares allotted in respect of earlier conversion of debs. 300,00,000 Rights shares than issued (prem. Rs 50 per share; prop. 1:4) all were taken up 14,60,000 additional shares were allotted to retain over-subscription for rights.
Along with the Rights issue, 14,00,000 No. of Equity shares were offered to employees at a premium off Rs 50 per share (under Employees Stock Option Scheme) but only 1,11,695 shares taken up. The balance 12,88,305 shares allowed to lapse.
1988
Linear Alkyl Benzene Project was commission on the second quarter of the year. LAB is sold under the brand name Relab.
1989
During the year approval was received under the board branding scheme for the manufacture of 15,000 tonnes per annum of PFY under the description PSF/PFY with in the licensed capacity PSF.
1990
During the year pursuant to the policy announced by Govt.
regarding minimum
economic scale, the company embarked upon expansion of PTA capacity from 1,00,000 tonnes to 2,00,000 tonnes per annum. The project is being undertaken in technical collaboration with John Brown Engineers & Constructors Ltd. UK.
During the year the company entered into a Memorandum of Understanding with West Bengal Industrial Development Corporation Ltd. for setting up a joint sector project for the manufacture of 15,000 tons per annum of polyester filament yarn. In December a joint sector agreement was entered into for setting up a new company under the name Reliance Bengal Industries Ltd.
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The technical collaborator for PFY and PSF was DuPont, US, and for PTA, UOP Processors, US, and ICI, UK.
1991
A technical collaboration agreement for 10 years was entered into with Stone And Webster Engineering Corporation USA for production of 4 lakh TPA of ethylene, 1.95 lakh TPA of propylene and 1.20 lakh TPA of mixed C4 stream.
During the period company commissioned its 1,00,000 TPA Ethylene Oxide and Mono Ethylene Glycol plant at Hazira.
In Series - `H' Debentures, 304,00,000 - 12.5% secured redeemable partly convertible debentures of Rs 150 each offered on Rights basis in the proportion 1 debenture: 5 equity shares held. Additional 45,60,000 debentures were allotted to retain over subscription. 15,20,000 debentures were offered to employees' on an equitable basis. Only 15,00,000 debentures taken up. The unsubscribed portion of 20,000 debentures were allowed to lapse. Rs 55 of the face value of each debenture was to be converted into 1 equity shares of Rs 10 each at a premium of Rs 45 per share at the end of 18 months from the date ofallotment.
Remaining Rs 95 of the face value of each
debenture was to be redeemed at par on the expiry of 10 years from the date of allotment.
In Series - `J' Debentures 76,00,000 - 14% secured redeemable non-convertible debentures of Rs 150 aggregating to Rs 114 crores attached with a detachable warrant, to the equity shareholders on rights basis in the proportion of one debenture for every 20 equity shares held. Additional 11,40,000 debentures were allotted to retain over subscription. The debentures of Rs 150 would be redeemed on the expiry of 10 years from the date of allotment.
In Series - `K' Debentures 265,50,000 - 17.5% Secured redeemable non-convertible debentures of Rs 100 aggregating Rs 265.50 crores to the equity shareholdes on Rights basis in the proportion of 1 debenture for every 6 equity shares held. These debentures would be redeemed on the expiry of 10 years from the date of allotment.
In 1991-92, RIL commissioned a petrochemicals unit to manufacture HDPE and PVC at Hazira, Gujarat, in technical collaboration with DuPont and BF Goodrich respectively.
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1992
With effect from 1st March Reliance Petrochemicals Ltd. was merged with the Co. As per the scheme of amalgamation, 1 equity shares of RIL was issued against 10 equity shares held in Reliance Petro Chemicals Ltd.
The PFY unit introduced a wide range of value added products including textured, twisted, high twisted dyed yarn.
Approvals were received from the Government
towards acquisition of 2 Suez-Max crude oil tankers.
The Company proposed to set up a project for the manufacture of 70,000 TPA of polyester yarn and 30,000 TPA of bottle grade PET chips in Hazira.
13% Pref. shares fully paid-up. 183,99,935 No. of Equity shares allotted till date as again 92,00,000 Global depository shares 749,40,440 No. of Equity shares allotted shareholders of erstwhile Reliance Petroleum Ltd., under Scheme of Amalgamation
1993
The PFY division introduced two new products viz., Micro and multi-filament yearn. Several new and customized product range was introduced such as ultra-stabilized raffia grade, high flow injection moulding grade and high ESCR blow moulding grade.
On May 27 the company offered 92,00,000 GDS representing 184,00,000 shares.
The company undertook to expand the captive power capacity at Hazira as well as set up new captive power plants at Naroda and patalganga. On completion of these project, an addition of 150 MW of power was to be added, increasing the total installed captive power plant capacity to 350 MW.
The Company proposed to set up a caustic chlorine plant with a capacity of 1,98,000 TPA of chlorine, 2,34,000 TPA Caustic Soda plant at Hazira for manufacture of ethylene di-chloride (EDC).
The Company was awarded the medium sized discovered oil and gas fields for exploration and production.
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364,60,000 No. of Equity shares allotted on part conversion of `H' Series debenture 100,05,586 No. of equity shares allotted again warrants issued. 3,16,667 shares allotted to SCICI on conversion of loans 103,16,027 shares allotted underlying. 127,66,000 GDS issued on 15.2.94 of which 81,66,571 shares yet to be allotted.
1994
Company issued 60,00,000 - 18% non convertible secured redeemable debentures of Rs.100 each on private placement basis with financial institutions.
A new product Octene LLDPE was introduced.
The Company undertook steps to de-bottlenecking its existing facilities and modernize the Control and Automation system. It was also proposed to set up a 5,000 TPA of FDY plant plant at Patalganga. In the fibre intermediate business, the Company undertook to set up a World Size PTA plant of 3,50,000 TPA at Hazira. A new plant to produce 1,20,000 TPA of MEG was to be set up adjacent to its existing capacity. It also proposed to increase the polyvinyl chloride capacity to 30,000 TPA.
The Company signed a Memorandum of Understanding with the Government of Assam for implementation of RAPL for manufacture of 3,00,000 TPA of ethylene, 3,00,000 TPA of Polyethylene and 65,000 TPA of Oxoalchols based on ethylene and propylene products from the gas cracker.
1995
On January the company issued 82,50,000 14% secured redeemable non convertible debentures of Rs.100 each on a private placement basis with financial institutions, banks/bodies corporate.
On 23rd January, the Company allotted 600,00,000 - 14% Secured redeemable nonConvertible debentures with detachable Warrants of Rs. 12.50 each.
During the year company commissioned a new Triethylene Glycol manufacturing factory with a capacity of 10,000 TPA to add value to Diethylene Glycol (DEG), a by product from its Monoethylene Glucol plant. TEG is an import substitute used in oil exploration, lubricants and speciality application.
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During the year company has an unincorporated joint venture with Enron & ONGC to develop Pann, Mukta and Tapti fields.
During June, the Company allotted 995,75,915 No. of equity shares of Rs 10 each to the erstwhile shareholders of Reliance Polypropylene Ltd. (RPPL) and Reliance Polyethylene Ltd. (RPEL) in the ratio of 30 equity shares of Rs 10 each for every 100 equity shares of Rs 10 each held in RPPL and 25 equity shares of Rs. 10 each of the Company for every 100 equity shares of Rs 10 each held in RPPL.
During the year company signed a Memorandum of Understanding with the Govt. of Assam for implementation of RAPL (Reliance Assam Petrochemicals Ltd.) for manufacture of 3,00,000 TPA of ethylene, 3,00,000 TPA of Polyethylene and 65,000 TPA of Oxoalchol based on ethylene and propylene products from the gas cracker.
Reliance Industries Ltd.(RIL), has tied up with United Oil processing Company of the US, for production of paraxylene at Jamnagar.
In 1995-96, it entered the telecom industry through a joint venture with Nynex, US. RIL is India's largest private sector enterprise, is a major player in the Indian petrochemicals sector.
1996
The company commissioned 3,50,000 tpa PTA Plant.
Reliance Telecom has struck a deal with US-based telecommunications giant Motorola to set up the cellular network in the secured circles. A letter of intent had been singed by both the companies in October.
During the year Co. completed debottelenecking of the PVC plant and increased the capacity to 270,000 tpa. As a part of its vertical integration stategy the Co. undertook to set up a new 1,20,000 TPA MEG project at Hazira.
During the year Co. commissioned new 1,60,000 TPA. PSF plant based on DuPont technology the PET bottle grade resin plant of 80,000 TPA capacity received technological assistance of SINCO Engineering Italy.
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During the same period company commissioned the 1,20,000 TPA MEG project using ABB Lummus crest, Netherland's techology. techology. And the NGL/Naptha NGL/Naptha gas cracker palnt using technology of stone & webster USA, neared mechanical completion.
During the year the the company commissioned commissioned 60,000 tpa PYF capacity at at Hazira. And a 350,000 tpa capacity polypropylene fully computerised plant was commissioned during 96-97.
During the year company commissioned the largest multified carbon plant to produce 7,50,000 tpa of ethylene, 365,000 tpa of propylene and over 10,00,000 tpa of anomatics and other products.
During the year company constructed a cost effective infrastructure commissioning of 1 single point mooring mooring system, 3 jetties. jetties. It has 1 ocean going going tanker, 4 ocean going vessels for liquefied gases gases and 5 tugs. The expansion is resigned resigned to handle handle Ethylene, Propylene, EDC,VCM, LPG, Butenes, MEG, PXBZ & Naphtha.
During the same year company undertook to implement 3 independent power projects in separate entities with a total power generating capacity of 1331 MW at Patalganga, Bawana, Jamnagar.
15% Pref. shares redeemed. 7,908 shares out of these meant meant for amalgamation issued. issued. 14% Pref. CR redeemed.
During the period Reliance Industries Limited, is to tie-up with Nynex Corporation to jointly bid for the licenses to operate basic and cellular telecom networks throughout India.
Reliance Industries Ltd., has tied up with the $ 16-billion Baby Bell telecom company from the US, the Nynex. The combine will bid for basic and cellular mobile telephone telephone service with the Department of Telecommunications.
The company was awarded four separate exploration blocks.
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1997
Enron Oil Gas, the joint venture partner and operator presented a proposal to Tapti Consortium participants seeking approval of a new development plant for Tapti gas fields by which the volumes could reach 17 million standard cubic meters during 2000 if the plan was approved.
During the year Co. commissioned an 80,000 tonnes bottle grade PET Chip plant at Hazira manufacturing complex. complex. The chips was marketed under the brand brand name Relpet.
The company commissioned a new 3,50,000 tpa PTA manufacturing facility based on ICI, UK technology.
The Company proposed to set up two more plants one PP plant with capacity of 4,00,000 tpa and these paraxylene plants with an aggregate capacity of 1.4 million tpa.
Company has set up a refinery at village Motikhvdi, Gujarat underthe name Reliance Petroleum Ltd. Reliance along with its subsidiary subsidiary Reliance Industrial Investments Investments & Holdings Ltd. hold 39% of the paid up equity capital of Reliance Petroleum on a fully deluted basis.
Reliance undertook to make significant investments in Reliance Petroleum Ltd., for setting up of the grass root refinery at Jamnagar, Gujarat.
46,60,90,452 bonus equity shares allotted 7289149 No. of equity shares allotted at conversion of debentures and reissue of forfeited shares.
Reliance Industries Ltd. (RIL) has successfully commissioned its third 30,000 tonnes per annum (tpa) polyester filament yarn (PFY) plant plant at Hazira in Gujarat. The capacity at the Hazira plant is being further extended to 120,000 tpa of PFY by setting up another 30,000 tpa plant shortly.
Bharti Telenet and Reliance were awarded letters of intent for Madhya Pradesh and Gujarat circles respectively.
Reliance Industries will commission the world's largest grass-root single-stream multifeed cracker plant.
The Reliance Industries Ltd. (RIL) has achieved the distinction of becoming the first company in the country to undertake security audit in the interest of its investors.
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Reliance Industries Limited has commissioned its second Mono Ethylene Glycol plant based on Shell process, with a capacity of 120,000 tons per annum, at its Hazira Petrochemicals Complex. The National Securities Depository Ltd. (NSDL) and Reliance Industries Ltd. are embarking on a joint marketing effort to issue RIL bonus shares in the demat form.
RIL was one of the first companies to join the depository and by issuing bonus shares through the demat form, investors will be assured of clean securities.
Around 57 lakh euro-convertible bonds of Reliance Industries Ltd. were converted into equity shares ahead of the book-closure for the 1:1 bonus issue on November 29.
Reliance Industries Ltd. has bagged the National Energy Conservation Award, 1997 in the petrochemical sector. sector. The petrochemicals giant giant has won the special special prize for the fourth consecutive year.
1998
For the first time Reliance Industries is entering the health-care sector with an initial investment of Rs.100 crore. It has become joint trustees of Sir Hurkisondas Nurrotumdas Hospital at Charni Road in Mumbai.
Reliance Industries, India's largest private sector company, has undertaken a major initiative on corporate governance, under which it has accorded a vital role to its nonexecutive directors.
Reliance Industries Ltd (RIL) founder and chairman Dhirubhai Ambani was awarded the prestigious the Dean's medal by the Wharton school (University of Pennsylvania) at a glittering ceremony in Mumbai on 15th June.
Reliance Industries Ltd (RIL) has won the runner up award in the Best emerging market company investor relations category for 1998 instituted by UK's Investor Relations Magazine in association with Financial Financial Times. Reliance is the first and only Indian company to have received this prestigious award and the only Asian company to get this award in the emerging markets category.
Reliance Industries Ltd (RIL) has struck an understanding with the US based engineering firm Carter burgess Ltd to undertake projects in the road sector through the joint venture route. In the proposed joint joint venture, reliance will have the majority stake.
RIL had entered into a 50:50 joint venture with Hoechst Fibres (a part of Hoechst AG, Germany) to manufacture aide range of polyester technical fibres.
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The Chennai High Court has declined to interfere with the award of the Rs 15,000-crore private power project at Jayamkondam in Tamil Nadu to Reliance Industries Ltd (RIL) by the State Industrial Development Corporation (TIDCO).
65,00,000 Red. Pref. shares of Rs. 100 each issued.
1999
The Company undertook the commissioning of its jamnagar petrochemicals complex.
Reliance Industries Ltd, is currently setting up a Rs 5,550 crores petrochemical complex at Jamnagar.
The un-incorporated joint venture between Reliance Industries, Oil and Natural Gas Corporation (ONGC) and the US-based multinational Enron Oil and Gas has submitted a proposal with the union petroleum ministry for a four-fold increase in its gas production from five million tons a day to 22 million tons a day.
Reliance Industries Ltd (RIL), India's largest private company, has chalked out a capital allocation framework to enhance shareholder value and ensure profit growth and capital productivity.
Once again Reliance Industries Limited (RIL) is in the international limelight. RIL been named as one of the World's 100 best-managed companies for the year 1999 by Industry Week (IW), a leading US magazine.
During 1999-2000, the company completed its integrated Jamnagar complex, in a record period of less then 3 years.
2000
Reliance has been ranked the second largest producer of POY and PSF in the world, and the largest polyester manufacturer in India, with a marketshare of 51 %.
Reliance is setting up a new venture for e-commerce related services and has roped in National Stock Exchange's head of market operations, derivatives, IPO and membership Ashishkumar Chauhan for piloting the new project.
Reliance Industries Ltd to sign PSCs for exploration blocks in West Coast.
Reliance Industries Ltd. to buy back shares up to Rs.1,100 crore at Rs.303.
The US-based Eastman Chemical Company signed MoU with Reliance Industries, to develop the market for Spectar copolymer and Eastar PETG copolyester in India. 26
Reliance and Malaysia's Petronas have signed an agreement with National Iranian Oil Co. to set up a 7.5 million-tonne per year liquefied natural gas plant in Iran, industry.
The Company has informed that, Reliance Power Ventures Ltd. awholly owned subsidiary of the company, propose to acquire an aggregate of 2,75,45,133 fully paid equity shares of BSES of face value of Rs. 10/- each at a price of Rs. 234/- per fully paidup equity share.
Reliance Power Ventures, a wholly-owned subsidiary of Reliance Industries.
Reliance Industries' internet service brand Only Smart was launched in Calcutta.
The Karnataka Government and Reliance Industries have set in motion a joint venture in e-governance to start 7,500 info kiosks all over the State.
The Company has acquired 100 acres at Patalganga to set up the proposed 447 mw power project.
Reliance Industries Ltd. and Jet Airways have signed an agreement in principle to work together on planned airport privatisation projects.
Issue of equity linked warrants under Employees Stock Option Plan.
Reliance Industries Ltd to set up a world-class Indian Institute of Information Technology.
Reliance Industries Ltd. is set to consolidate the financials' of BSES Ltd. under its own income statement from the second quarter of this fiscal.
The board has issued 5,26,87,851 equity-linked warrants under the ESOP in accordance with the resolutions passed at the company's 26th AGM.
Reliance Industries Ltd is the first private sector Indian company to find a place in the Forbes' International list of the 800 largest non-US companies, published in the current edition of the magazine.
The Company has been selected as one of the World's 100 best-managed companies for the Year 2000.
Reliance Industries Ltd (RIL) has topped in mobilisation through debt private placements during the first quarter of the current fiscal.
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The Company executive director Nikhil R Meswani has been elected as president of Associaton of Synthetic Fibre Industry.
Credit rating agency Crisil has assigned the highest safety rating of `AAA' to the Rs 500 crore non-convertible debenture issue of the company.
Reliance Industries is set to take over the polyester business of JCT in a deal valued at Rs 492 crore.
Reliance Industries Ltd was completing the Assam Gas Cracker Project within 44 months on finalisation of Gas Supply Agreement with Oil India Ltd and ONGC/GAIL, and the handing over possession of land at Lepetkota in Dibrugarh district.
Reliance has formed a joint venture with Andhra Pradesh Technological Services to set up 7,500 Internet kiosks across Andhra Pradesh to provide electronic governance to rural areas.
Reliance Industries as entered into a collaboration agreement with Nova Chemicals of Switzerland for the manufacture of high density polyethylene and develop new grades of polymers like film, pipe, blow moulded containers etc.
Reliance has been awarded the entertainment centre property in Mumbai's upscale Bandra-Kurla commercial complex.
Reliance holds a 30% interest in an unincorporated joint venture with Enron and ONGC, to develop the proven Panna, Mukta and Tapti (PMT) oil and gas fields. Enron has a 30% share and ONGC the balance 40% share.
2001
During FY 2000-01, Reliance was, in a 90:10 consortium with Niko Resources of Canada, awarded 12 new exploration blocks by the government through a process of competitive international bidding.
Reliance Industries and RPG have envisaged interest in setting up a convergence network in Industrial Township of greater Noida.
In April 2001, RIL successfully completed the first phase of a comprehensive restructuring plan for its textiles business located at Naroda, near Ahmedabad in the state of Gujarat, which presently contributes 1% of RIL's total revenues.
Fitch Ratings India Ltd. has assigned `Ind AAA' rating to the Rs 5,000-crore nonconvertible debentures of the Company. 28
Reliance Industries has acquired an equity stake in five of Tullow Oil's blocks in Gujarat and Andhra Pradesh.
Reliance Industries has signed a memorandum of associatin with National Iranian oil and BP to undertake a million easibility study to develop an LNG project in southern Iran.
Reliance Industries has entered into an alliance with Bangalore-based Indus League for the manufacture of its sole branded garment, Reance.
The Company has extended the share buyback programme for one more year as it has not bought back any shares during the current buyback period.
Reliance Industries has raised its stake in Larsen & Tourbo from 0.38 percent to 2.87 percent.
It has increased its stake in equity share capital of BSES, an electirc utility company, through open offer to 27%. Further it has announced the largest share buy back of Rs 1,100 crore at a maximum price of Rs 303 per share.
Reliance Industries will invest Rs 1,500 crore (0 million) in oil and gas exploration and production sector over the next three years.
Reliance Industries Ltd (RIL) has been granted the Golden Super Star Trading House status by the Directorate-General of Foreign Trade (DGFT) in recognition of RIL's outstanding achievement in export. RIL is the first manufacturer-exporter to be given this status
RIL has obtained ISO 9002 certification from BVQI for its Patalganga and Hazira complexes. RIL is the first private sector company in India to be rated by the international credit rating agencies.
Reliance is the world's third largest producer of paraxylene (PX), and the world's fourth largest producer of PTA. Within the country, Reliance is the largest manufacturer of PX, PTA and MEG, with a marketshare of over 80%.
Reliance is the largest producer of polymers in the country with a marketshare of 52%. Reliance has a capacity of nearly a million tons per year of polypropylene (PP), 400,000 tonnes per year of polyethylene (PE) and 300,000 tonnes per year of polyvinyl chloride (PVC).
In Nov. 2001, Reliance Industries sold its just over 10% equity stake in Larsen & Toubro, the second largest player in the cement industry, to Grasim Industries for Rs 766.5 crore. The divestment of the L&T stake is in consonance with its declared objectives of 29
unlocking value from its investments, in the interests of maximising overall shareholder value. 2002
In Jan. 2002, Reliance Petroinvestments has become a subsidiary of the company, while Reliance Life Insurance Company and Reliance General Insurance Company have ceased to be subsidiaries of the company.
In March 2002, the Board approved the proposal for amalgamation of Reliance Petroleum Limited (RPL) with the Company. The proposed Scheme of Amalgamation provides that the amalgamation will take effect from the Appointed Date i.e. April 1, 2001. All assets,liabilities and obligations of RPL will vest in the company w.e.f from the said appointed date. One equity share of the company will be allotted for every eleven equity shares of RPL held.
Shareholders of Reliance Petroleum Ltd on April 15 approved the merger of RPL with Reliance Industries Ltd at a meeting held in Jamnagar and convened under the orders of the Gujarat High Court.
Reliance Industries acquires 26% state & management control in Indian Petrochemicals Corporation Ltd. (IPCL) by paying Rs 1490.84 crore to Government of India.
2003
Discovers gas it its offshore exploration in Gujarat
Finds more gas in Block D6 in the deep waters of Krishna Godavari Basin
Shuts down the aromatics plant at Jamnagar, Gujarat
Company’s Hazira manufacturing unit gets IMC-Bajaj quality award
2002
Discovers fourth gas in KG-basin
Unveils two improved lines of acrylic fibres
Anil Ambani appointed as BSES MD
Reduces stake in BSES from 55% to 49.5% and BSES ceases to be subsidiary of the company due to the disinvestment
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Revises reserves of gas in Krishna Godavari Basin to 10.45 trillion cubic feet
Signs pact with Council of Scientific and Industrial Research (CSIR) to create breakthrough technology in key areas from laboratory to commercial scale wherein the company will be offered the first right to the IPR (intellectual property right) for commercial development
Ties up with DuPont Polyester Technologies (DPT) for the research and development (R&D) of the advanced polyester process and product technologies in India
Foreign Institutional Investors (FIIs) convert 24 million shares of the company into Global Depository Receipts (GDRs)
Strikes substantial gas reserves in Shahdol, Madhya Pradesh
Shifts corporate headquarters from Maker Tower IV, in Nariman Point to Reliance Centre in Bellard Pier
Oil discovered in RIL's exploration block 9 in Yemen in which the company holds 20% shares
Global rating agency Moody's changes the outlook on debt securities of the company from negative to stable
Incidence of leakage in the FCC section of the company's refinery at Jamnagar, in the State of Gujarat
Anil Ambani, Vice Chairman & Manading Director, voted as MTV Youth Icon of the Year
Initiated the work on deep-water exploration block, KG-D6, in the Krishna-Godavari basin off the Andhra Pradesh coast. RIL bags fourth slot among `Top 10' in Asiamoney's corporate governance poll on Asian companies in the energy sector. And joined the club of a select few Asian companies and is the only Indian private sector enterprise to find a place in the `Top 5' in the energy sector category
Mukesh Ambani, chairman and managing director (CMD), donates million to health programmes of the International Federation of Red Cross (IFRC) and Red Crescent Societies
Reliance exhorts NTPC Kayamkulam plant transplantation to Kakinada
Reliance occupies top slot in oil exports
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2004
Munich Re throws away Reinsurance JV program with RIL
Reliance Industries Associate signs MOU with National Organic Chemicals Industries Limited (NOCIL) fo taking over its petrochemicals & plastic products division
IPCL picks up gas from Petronet LNG
Reliance Jamnagar refinery voted best among 50 refineries worldwide
Gujarat gives away Gujarat Garima Awards to Tata, Ambani
Reliance Industries Limited (RIL) has increased the capacity of its Jamnagar refinery to 33 million tonnes from 30 million tonnes.
Mukesh Ambani ranks 40th in the world business leaders
Reliance join hands with Gail for Indo-Iran natural gas pipeline project
Reliance Industries, country' largest private sector company, has surged ahead of global players after it posted a net profit of more than billion in 2003-04.
Reliance Industries Ltd has bagged a National Thermal Power Corporation (NTPC) order to supply 3 million tonnes of natural gas per annum for the latter's proposed 1300-MW power stations at Kawas and Gandhar in Gujarat for seventeen years
RIL chairman wins Asia Society Leadership award
RIL, IOC inks deal for petro goods offtake
Reliance Industries announced that it had acquired Trevira, a polyester company in Germany, for around Rs 440 crore (E80m), taking it closer to the position of the world's largest polyester maker
RIL appoints Parthiv Patel as sports executive
Reliance Industries takes over NIS Sparta
Reliance join hands with Temasek for 0 mn Power Fund
Reliance picks up Nasscom IT Excellence Award
RIL gets `Petrochemicals Company of the Year' award for 2004 32
2005
RIL partners with Vivada for sale of diesel to fishing trawlers and boats
Reliance Industries Ltd was awarded the `International Refiner of the Year' 2005 at the World Refining and Fuels Conference's awards ceremony held in San Francisco on March 10, 2005.
Reliance Industries wins annual '2005 ASTD Best Award' from American Society for Training & Development
Reliance Industries wins two National Energy Conservation awards
Reliance Industries bags 'National Award for R&D Efforts in Industry
RIL inks MoU with HSIDC for establish multi-product SEZ
Reliance Infocomm has joined hands with Vyjayanti Movies, the producers of 'Jai Chiranjeeva' featuring Tollywood megastar Chiranjeevi, Sameera Reddy and Bhumika Chawla.
2006
RIL inks marketing pact with Gulf Oil
Reliance Industries has unveiled the much-talked about Reliance Fresh brand, the first format of the company's Rs 25,000-crore retail initiative, here on October 29.
2007
Reliance inks JV with Yemen oil firm for refinery
Gail India Ltd and Reliance Industries Ltd (RIL) signing a Memorandum of Understanding (MoU) for cooperation in gas sector on March 15, 2007.
Reliance Industries Ltd has appointed Dr. R A Mashelkar has been appointed as an Additional Director on the Company's Board.
Reliance Industries Ltd has formed a 0 million joint-venture with Mammut Group of Dubai.
Reliance signs agreement to acquire assets in Malaysia Consolidating global polyester vision. 33
RIL buys Malaysian based polyester firm.
Reliance Industries Ltd has signed Technical Evaluation Agreement in 2005 which has been converted to Hydrocarbon Production and Exploitation Contracts with Agenda Nacional de Hydrocarburos (ANH) of Colombia for two Offshore blocks, Borojo (pronounced as Boroho) North and Borojo South.
2008
Reliance Industries makes Another Gas Discovery in Shallow Water Block in the Krishna Basin.
RIL wins a Deep Water block in NELP VII
Reliance Industries Strikes Eighth Gas Discovery in Block NEC - 25 in the Mahanadi Basin
2009
Reliance Industries has discovered natural gas reserves in a well drilled on its NEC-25 block in Mahanadi basin, off the Orissa coast.
Reliance Industries has raised around Rs 3,188 crore through sale of 1.50 crore equity shares of the company.
2010
Haryana Special Economic Zone (SEZ), Reliance Industries (RIL) has roped in a partner, in a bid to re-energize its dormant.
RIL has bought around 3 mn barrels of spot crude from Brazilian company Petrobras. The delivery is expected in the next two months. The purchase was fuelled by lower freight rates and weaker US crude prices as compared to Europe. Reliance has bought a VLCC of Roncador Heavy and Albacora crudes to be loaded this month, and a Suezmax of October-loading Marlin.
Sources:http://www.moneycontrol.com/company-facts/relianceindustries/history/RI4th january,2011
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Management of Reliance Industries
Name Mukesh D Ambani Hital R Meswani Pawan Kumar Kapil Mansingh L Bhakta Dharam Vir Kapur Ashok Misra Raghunath A Mashelkar
Designation Chairman and Managing director Executive Director Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director
Nikhil R Meswani Executive Director P M S Prasad Executive Director Non Executive Director Ramniklal H Ambani Non Executive Director Yogendra P Trivedi Non Executive Director Mahesh P Modi Non Executive Director Dipak C Jain Sources: http://www.moneycontrol.com/company-management/relianceindustries/board-of-
directors/RI4th January, 2011.
Backward vertical integration Backward Vertical Integration is process by which a firm takes ownership or increased control of its supply systems. It serves to streamline the organization, to provide better cost controls, and to eliminate the middleman. Because of efficiency and lowered costs of production it is possible for the firm to become more competitive in the marketplace. Vertical Integration is concerned with how much control a company has over its upstream supplier and downstream buyers. There are three different varieties of Vertical Integration, backward vertical integration which is upstream, forward vertical integration which is downstream and balanced vertical integration which is a combination of both. A company uses Backward Vertical Integration when it controls subsidiaries that produce some of the inputs used to in the production of its products. A company uses Forward Vertical Integration when it controls distribution centres and retailers where its products are sold. Balanced Vertical Integration means a firm controls all of the components, from raw materials to final delivery.
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Sources: http://www.indian-firms.com/reliance-group 2nd january2011
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Organizational Structure of Reliance
RelianceIndustries Limited
Reliance Petroleum Limited
Reliance Life Sciences
Reliance Logistics
Reliance Retail Limited
Reliance Industrial Infrastructure Limited (RIIL)
Figure 1 Reliance Major Subsidiaries
Reliance Petroleum Limited (RPL) was a subsidiary of Reliance Industries Limited (RIL) and was created to exploit the emerging opportunities, creating value in the refining sector worldwide.Currently, RPL stands amalgamated with RIL.[7]
Reliance Life Sciences is a research-driven, biotechnology-led, life sciences organization that participates in medical, plant and industrial biotechnology opportunities. Specifically, these relate to Biopharmaceuticals, Pharmaceuticals, Clinical Research Services, Regenerative Medicine, Molecular Medicine, Novel Therapeutics, Biofuels, Plant Biotechnology and Industrial Biotechnology.[8]
Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of setting up / operating Industrial Infrastructure that also involves leasing and providing services connected with computer software and data processing.[9]
Reliance Logistics (P) Limited is a single window solutions provider for transportation, distribution, warehousing, logistics, and supply chain needs, supported by in house state of art telematics and telemetry solutions.[11]
Reliance Clinical Research Services (RCRS), a contract research organization (CRO) and wholly owned subsidiary of Reliance Life Sciences, has been set up to provide clinical research services to pharmaceutical, biotechnology and medical device companies.[12]
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As far as Board structure of RIL is concerned there are 8 Non executive directors and four executive directors, hence RIL is strictly following suggestions given by Kumar mangalam Birla committee regarding corporate governance.
Figure 2 Reliance Board Structure
Figure 3 Reliance Reporting Hierarchy
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Functional structure Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with production engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible. As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost. For instance, a small business could start making the components it requires for production of its products instead of procuring it from an external organization. But not only beneficial for organization but also for employees faiths. Hence Reliance is Having Highest Operational efficiency as compared to competitors.
Management Style and Culture at Reliance Industries Limited Reliance Industries Limited (RIL) has emerged as India's largest private-sector enterprise and carved out a distinct place for itself in global Fortune 500 companies. Reliance's business success and competitive position reflect the leadership provided by its founder, Mr. Dhirubhai Ambani who said, "Growth has no limit at Reliance. I keep revising my vision. Only when you dream it do you get it." The leadership system defined by Ambani is based on value creation towards both its customers and stakeholders. The same vision has been taken up and forwarded by his son Mr. Mukesh Ambani, current Chairman and Managing Director of RIL. Reliance believes that any business conduct can be ethical only when it rests on the nine core values of Honesty, Integrity, Respect, Fairness, Purposefulness, Trust, Responsibility, Citizenship and Caring.
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The existence of the culture in RIL is driven towards achievement of excellence in systems, processes, technology and people and also toward the fulfillment of their corporate vision i.e. "To become a globally competitive enterprise, driven by the market, creating and maintaining a lead over competition through quality products and establishing itself to be the preferred supplier of its customers." With the vertical integration of chain from refinery to textiles, RIL has unique fully integrated structure. Basically it is a process centric organization that maximized synergies across all interfaces, leverage core competencies of various disciplines to maximize value from current assets and create growth opportunities while allowing people to develop and contribute to their full capabilities. When we talk about the organization culture, specifically RIL focuses on high performance work culture which fosters innovation, entrepreneurship, inclusiveness, teamwork and continuous improvements. Among all RIL basically focuses on innovation and has a innovative council for promoting the same. The company believes that it is the innovation in thinking and execution that has made RIL reach where it is today. The firm belief of innovation being the differentiator for future and the source of competitive advantage shows the importance that is given to it. RIL in the early 1990s did suffer from low employee participation in improvement activities and low customer satisfaction. The introduction of various quality improvement tools in the facilities like the Total Quality Management( TQM), Kaizen Activities and customer focus approach led to the improvement in quality, productivity improvement and customer satisfaction in the organization. RIL realizing the importance of human and intellectual capital for business success, has given more importance to the use of its human potential and the creation of Learning organization to help in continued success in future. RIL in its importance to the health and safety also has also initiated Safety, Health and Workplace Environment Program (CASHe) – which is an initiative to promote healthy workplace and reducing health and safety risk has been instrumental in creating a culture of implementing health, safety and environment project on a priority basis. This program has also been able to improve the performance of the company on the occupational health and safety front. The Health and Safety Principles that were put forward in this regards to articulate the stakeholders expectation along with the existing values of the company underpin both the corporate culture and cooperation across the company. The growing importance of Corporate Governance by RIL shows its priority towards a transparent and accountable organization thus being able to meet the needs of all the concerned stakeholders. The publication of annual corporate governance report is one important aspect showing its growing inclination towards it and its aim to have fair and equitable treatment of its employees, shareholders, customers and investors. They aim to provide timely and balanced disclosure of all material information concerned towards 40
stakeholders. Moreover they aim to have a sound system of risk management and internal control. The existence of code for board of directors and board committees, code of business conduct and ethics for director/management personnel signifies the existence of the culture driving the whole organization towards effective corporate governance. RIL has a long and strong tradition of supporting the larger communities that it connects with from education, health, drinking water, large-scale development of employable skills, to assistance during natural calamities such as earthquakes and cyclones. The Reli ance Foundation would address social development imperatives of India, specifically quality, formal and vocational education, affordable high-quality health care, meaningful rural development and urban renewal, and protection and promotion of India's priceless heritage of arts and culture. Management in simple words are characteristic ways of making decisions and relating to subordinates. Different management styles and employed by different organizations depending on the prevailing culture, the nature of the business, the nature of the task and the personality and skills of the leaders. RIL is an organization which is operation in multiple facets. They have multiple manufacturing facilities at multiple locations where by dealing in different product ranges. The supreme authority of the company is Board of Directors. But they have given much more independence to the individual units at different level to take decisions at their level. There is a good mix of corporate level strategy (taking RIL as a whole which is set up by the BOD) as well as appropriate business level and operational strategies at each segment as well as business units to accomplish the corporate level strategy. Every unit which is a part of RIL has its own hierarchy, headed by the CEO or the President, but a more of a democratic style of leadership is seen. Since they promote innovation and value their human capital they promote participative environment at different levels of management to be able to make a better and informed decision. Empowering the employees in RIL is relevant. However the level of decisions and intensity of problems are defined whereby decisions can be taken at particular level of management.
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Management Control Systems Internal Controls RIL has a comprehensive system of internal controls to safeguard the Company’s assets against
loss from unauthorized use and ensure proper authorization of financial transactions. The Company has an exhaustive budgetary control system to monitor all expenditures against approved budgets on an ongoing basis. The Company’s accounting process is based on uniform
accounting guideline that sets out accounting policies and significant processes and deadlines on a company wide basis. There are binding directives for internal reconciliations and other accounting operations. The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the reliability of financial controls, and compliance with laws and regulations. RIL has well established policy towards maintaining the highest standards of health, safety and environmental norms while maintaining operational integrity. This policy is strictly adhered to all RIL manufacturing facilities. The Company has an internal audit function, which is empowered to examine the adequacy and compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process. The management duly considers and takes appropriate action on the recommendations made by the statutory auditors, internal auditors and the independent Audit Committee of the Board of Directors.
Internal Checks and Balances. At the heart of our processes is the wide use of technology that ensures robustness and integrity of financial reporting. Reliance deploys a robust system of internal controls to allow optimal use and protection of assets, facilitate accurate and timely compilation of financial statements and management reports and ensure compliance with statutory laws, regulations and company policies.
42
Audit committee Powers of the Audit Committee:
1. To investigate any activity within its terms of reference. 2. To seek information from any employee. 3. To obtain outside legal or other professional advice. 4. To secure attendance of outsiders with relevant expertise, if it considers necessary
The role of the Audit Committee includes:
1. Oversight of the Company’s financial reporting process and the disclosure of i ts financial information to ensure that the financial statements are correct, sufficient and credible. 2. Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of Statutory Auditors and fixation of audit fees. 3. Approval of payment to Statutory Auditors for any other services rendered by the Statutory Auditors. 4. Reviewing with the management, the annual financial statements before submission to the Board for approval, with particular reference to:
Matters required to be included in the Directors’ Responsibility Statement to be included in the Directors’ Report in terms of sub - section (2AA) of Section 217 of
the Companies Act, 1956.
43
Changes, if any, in accounting policies and practices and reasons for the same.
Major accounting entries involving estimates based on the exercise of judgement by the management.
Significant adjustments made in the financial statements arising out of audit findings.
Compliance with listing and other legal requirements relating to financial statements.
Disclosure of related party transactions.
Qualifications in draft audit report.
5. Reviewing with the management, the quarterly financial statements before submission to the Board for approval. 6. Reviewing with the management, the performance of Statutory and Internal Auditors, adequacy of internal control systems. 7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit. 8. Discussion with Internal Auditors any significant findings and follow up thereon. 9. Reviewing the findings of any internal investigations by the Internal Auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 10. Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well as post audit discussion to ascertain any area of concern.
44
11. To look into the reasons for substantial defaults, if any, in the payment to the depositors, debenture holders, shareholders (in case of nonpayment of declared dividends) and creditors. 12. To review the functioning of the Whistle Blower Mechanism. 13. Carrying out such other functions as may be specifically referred to the Committee by the Board of Directors and / or other Committees of Directors of the Company. 14. To review the following information :
The management discussion and analysis of financial condition and results of operations;
Statement of significant related party transactions (as defined by the Audit Committee), submitted by management;
Management letters / letters of internal control weaknesses issued by the Statutory Auditors;
Internal audit reports relating to internal control weaknesses; and
The appointment, removal and terms of remuneration of Internal Auditors.
15. Reviewing the financial statements and in particular the investments made by the unlisted subsidiaries of Company. 16. Review of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.) Recommendation
In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and 45
services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control system. Sources:http://www.indiainfoline.com/Markets/Company/Fundamentals/Management-
Discussions/Reliance-Industries-Ltd/500325 4th January, 2011
46
Financial Analysis Industry BSE Code Market Lot
Diversified Business Group NSE Code 500325 1
Face Value
Ambani Group RELIANCE
Chairman
Rs. 10.00
Book Closure
ISIN No
Mr. Mukesh Ambani INE002A01018
D
21/10/2010
Mar ' 10
Mar ' 09
Mar ' 08
Mar ' 07
Mar ' 06
46.91 79.00 49.64 81.74 7.00 91.64 392.51
100.13 133.14 97.28 130.29 13.00 153.47 727.66
93.80 127.14 133.86 167.20 13.00 154.32 542.74
87.29 121.84 85.71 120.26 11.00 146.44 439.57
65.37 89.78 65.08 89.49 10.00 103.76 9.73
419.43
802.54
548.73
458.61
10.24
587.37 378.21
902.02 704.28
920.48 520.59
801.57 416.90
580.39 301.36
Profitability ratios Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%)
15.57 10.43 8.44 13.29 11.95 12.64 11.71
17.01 13.35 10.65 14.58 13.76 13.36 11.34
16.76 13.14 14.45 13.73 17.28 24.66 17.18
18.26 13.95 10.64 15.13 19.85 19.49 19.83
17.87 13.67 11.13 15.35 20.17 20.08 18.88
Leverage ratios Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio
0.45 0.48 67.25 0.94
0.59 0.64 60.77 1.01
0.35 0.46 68.38 1.29
0.32 0.45 68.76 1.13
0.36 0.48 67.37 0.95
Per share ratios Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs)
47
Liquidity ratios Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio
1.29 1.11 0.76 8.29
1.23 1.08 0.90 12.92
1.39 1.01 0.93 10.57
1.17 0.77 0.68 10.65
1.15 0.83 0.67 9.60
Payout ratios Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio Cash earnings retention ratio
14.97 9.09 84.16 90.60
14.49 10.82 85.92 89.41
9.80 7.85 86.01 89.68
13.75 9.80 86.50 90.33
17.52 12.74 82.56 87.30
Coverage ratios Adjusted cash flow time total debt Financial charges coverage ratio Fin. charges cov.ratio (post tax)
2.42 16.08 14.37
3.53 14.58 12.56
1.97 19.95 21.90
1.64 16.06 13.90
1.75 16.84 14.95
Component ratios Material cost component (% 80.00 76.98 73.86 72.32 earnings) Selling cost Component 2.14 2.18 2.41 3.27 Exports as percent of total sales 53.46 61.22 56.80 52.40 Import comp. in raw mat. consumed 95.39 95.74 93.96 94.04 Long term assets / total Assets 0.71 0.74 0.69 0.73 Bonus component in equity capital 64.47 30.61 33.14 34.57 (%) Sources: http://www.moneycontrol.com/india/stockpricequote/refineries/relianceindustries/RI3rdjanuary, 2011
48
73.86 5.85 38.10 95.41 0.72 34.58
Liquidity Ratio The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It is expressed as follow:-
=
66,595.32 51,584.08
Current Ratio = 1.29 It is important to note that a very high ratio of current assets to current liabilities may be indicative of slack management practices, as it might signal excessive inventories for the current requirement & poor credit management in terms of overextended accounts receivable. At the same time, the firm may not be making full use of its current borrowing capacity. Although there is no hard & fast rule, conventionally, a current ratio of 2:1 is considered satisfactory. The logical underlying the conventional rule is that even with a drop – out of 50% in the value of current assets, a firm can meet its obligations.
Current Ratio 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
e l t i T s i x A
1
2
3
4
5
Current ratio
1.29
1.23
1.39
1.17
1.15
Year
2010
2009
2008
2007
2006
The current ratio of the company is 1.29:1 that is less than 1.5:1. From the graph we find that, from the last three years the current ratio first rises & then decline. So we can say that the company’s short term financial position is not good.
49
Quick Ratio:Quick ratio indicates whether the firm is in a position to pay its current liabilites within a month or immediately. It is expressed as follows:
Quick Ratio =
Quick Asset Current Liabilities
39203.90 = 51,584.08
Quick ratio = 0.76
The acid – test ratio is a rigorous of a firm’s ability to service short – term liabilities. The usefulness of the ratio is the fact that it is widely accepted as the best available test of the liquidity position of the firm. That means the acid – test ratio is superior to the current ratio. The interpretation of the liquidity position of the firm needs modification in the light of the quick ratio. Generally speaking, an acid- test ratio of 1:1 is considered satisfactory as a firm can easily meet all current claims.
Quick Ratio
e l t i T s i x A
2011 2010 2009 2008 2007 2006 2005 2004 2003 Quick ratio
1 0.76
2 0.9
3 0.93
4 0.68
5 0.67
Year
2010
2009
2008
2007
2006
The quick ratio of the company is 0.76:1 which is less than 1:1. From the graph also we find that from the last three years the ratio first rise then decline. So we can say that the company is not in the position to pay its current liabilities instantly.
50
Activity Ratio Inventory Turnover Ratio:In business management, the Inventory turnover is an equation that measures the number of times inventory is sold or used over in a period such as a year. The equation equals the cost of goods sold divided by the average inventory. Inventory turnover is also known as inventory turns, stock turnover.
=
125921.54 15189.57
Inventory Turnover Ratio= 8.29
A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or shortages.
Inventory Turnover ratio 100% 100% 100% 99% 99% 99% 1
2
3
4
5
Inventory turnover ratio
8.29
12.92
10.57
10.65
9.6
Year
2010
2009
2008
2007
2006
51
The Inventory Turnover ratio of the company is 8.29. From the graph we find that from the last three years the ratio is increasing but this year the ratio is negative in comparison of last year. It is a not good sign for the company. From the graph we can say that the management is not its using the stock efficiently.
Fixed Assets Turnover Ratio:-
Fixed Assets Turnover Ratio=
COGS Net Fixed Asset
=
125921.54 133959.09
Net Fixed Assets = Fixed Assets - Deprecation
Fixed Assets Turnover Ratio = 0.94
This ratio is of particular importance in manufacturing concerns where the investment in fixed assets is quite high. This ratio reveals how efficiently the fixed assets are being utilized. Compare with the previous year, if there is increase in this ratio, it will indicate that there is better utilization of fixed assets. If there is a fall in the ratio, it will show that fixed assets have not been used as efficiently, as they have been used in the previous year.
Inventory turnover ratio 100% e l t i T s i x A
100% 1
2
3
4
5
Fixed assets turnover ratio
0.94
1.01
1.29
1.13
0.95
Year
2010
2009
2008
2007
2006
52
From the graph we find that, from the last three years the ratio had first increase then decrease. So we can say that the company is not using its assets properly
Profitability Ratio or Income Ratio Profitability Ratios based on sales:Gross Profit Ratio:-
Gross Profit Margin =
=
100
2008400 192461
Remember:
Turnover = Sales Gross Profit = Turnover - Cost of Sales Gross Profit Ratio = 10.43
The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold. It is a very simple idea and it tells us how much gross profit per turnover our business is earning.
Here are a few examples of the gross profit margins from different businesses or Reliance
Leisure
International
&
Airline
Manufacturer Retailer Discount Refining Airline
Pizza
Accounting
Restaurants
Software
47.52%
89.55%
Hotels Gross
9.64%
5.62%
35.14%
11.41%
profit
53
27.46%
11.99%
Gross profit
Leisure & International Hotels Airline 4% 2% Manufacturer 15%
Accounting Software 38%
Retailer 5% Discount Airline 11%
Pizza Restaurants 20%
Refining 5%
Gross Profit Margin 100% 100% 100%
e l t i T s i x A
99% 99% 99% 99% 1
2
3
4
5
Gross profit margin (%)
10.43
13.35
13.14
13.95
13.67
Year
2010
2009
2008
2007
2006
The Gross Profit ratio of the company is 10.43. From the graph we find that, from the last three years the ratio first decrease then increase but this year ratio was decrease that mean company is not making it sales quickly compare to last year. So we can say that the company is not doing well this year.
54
Net Profit Ratio
Net Profit Margin =
100
=
16236 192461
X100
Remember:
Net Profit = Gross Profit - Expenses Net Profit ratio= 8.44
The net profit margin ratio tells us the amount of net profit over turnover of a business has earned. That is, after taking account of the cost of sales, the administration costs, the selling and distributions costs and all other costs, the net profit is the profit that is left, out of which they will pay interest, tax, dividends and so on. Here are a few examples of the net profit margins from the same businesses we saw in the gross profit margin section:
Leisu
Internation
re &
al Airline
Manufacturer
Retailer
Discount Refining
Pizza
Accounti
Airline
Restaura
ng
nts
Software
7.55%
27.15%
Hotel s Net
7.36%
4.05%
10.48%
1.63%
Prof it
55
10.87%
12.63%
Leisure & International Hotels, 7.36% Airline, 4.05% Manufacturer, 10.48%
Accounting Software, 27.15 %
Refining, 12.63 %
Retailer, 1.63% Discount Airline, 10.87%
Pizza Restaurants, 7.5 5%
Net Profit Margin 2025 2020 2015
e l t i T s i x A
2010 2005 2000 1995 Net profit margin (%)
1 8.44
2 10.65
3 14.45
4 10.64
5 11.13
Year
2010
2009
2008
2007
2006
A high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is decline, cost of production is rising & demand for the product is falling. A low net profit margin has the opposite implications. However, a firm with a low margin can earn a high rate of return on investments if it has a high inventory turnover. The net profit ratio of the company is 8.44%. From the graph we also find that, from the last three years the net profit ratio first rise then decline but company has a high inventory turnover ratio. So we can say that the company is in a good position but not earning profit comparing to last year. 56
Operating Ratio:This ratio measures the proportion of an enterprise’s cost of sales and operating expenses in
comparison to its sales:
Operating Ratio =
=
+
29,969.07 192461
100
100
Operating ratio = 15.57%
Operating ratio’ & ‘operating profit ratio’ are inter – related. Total of both these ratios will be 100. A rise in ‘Operating Ratio’ will lead to a similar amount of decline in ‘Operating Profit Ratio’
& vice – versa. Operating ratio is a measurement of the efficiency and profitability of the business enterprise. The ratio indicates the extent of sales that is absorbed by the cost of goods sold and operating expenses. Lower the operating ratio, the better it is, because it will leave higher margin of profit on sales.
Operating Margin 100% 100% 100%
e l t i T s i x A
99% 99% 99% 99% 99% Operating margin (%)
1 15.57
2 17.01
3 16.76
4 18.26
5 17.87
Year
2010
2009
2008
2007
2006
57
The operating ratio of the company is 15.57. From the graph we find that, from the last years the ratio decline. So the company’s operating profit ratio is less from the last year beca use it’s operating ratio decrease. So we can say that company is in a good position.
Profitability Ratios based on Investment:Earnings Per Share:This ratio can be expressed as follows:
EPS =
.
=
16,235.67 32,703.74
EPS = 49.64 EPS is a widely used ratio. Yet, EPS as a measure of profitability of a firm from the owner’s point
of view should be used cautiously as it does not recognize the effect of increase retention of earnings. It does not necessarily follow that the firm’s profitability has improved because the
increased profits to the owners may be the effect of an enlarged equity capital as a result of profit retentions, though the number of ordinary shares outstanding still remains constant.
EPS 100% 98% e l t i T s i x A
96% 94% 92% 90% 1
2
3
4
5
Reported EPS (Rs)
49.64
97.28
133.86
85.71
65.08
Year
2010
2009
2008
2007
2006
58
As a profitability ratio, the EPS can be used to draw inferences on the basis of (i) its trends over a period of time (ii) comparison with the EPS of other firms & (iii) comparison with the industry average. From the graph we found that the profit available to the equity shareholders on a per share basic is going down.
Dividend per Share:Dividend per Share is the dividend paid to the shareholders on a per share basis. In other words, DPS is the net distributed profit belonging to the shareholders dividend by the number of ordinary shares outstanding. That is:
DPS =
.
=
228926.18 32,703.74
DPS = 7.00
DPS 100% 100% e l t i T s i x A
100% 99% 99% 99% Dividend per share Year
1 7
2 13
3 13
4 11
5 10
2010
2009
2008
2007
2006
59
The Dividend per Share would be a better indicator than Earning per Share. Like the earning per share, the dividend per share also should not be taken at its face value as the increased dividend per share may not be a reliable measure of profitability as the equity base may have increased retention without any change in the number of outstanding shares. From the graph we found that from the last three years the DPS first increase then since last two years the dividend per share is constant but in the current year the dividend is decrease so there is less return to shareholders so it is not good sign for company.
Leverage or Capital Structure Ratio Debt – Equity Ratio:The D/E ratio is an important tool of financial analysis to appraise the financial structure of a firm. It has important implication from the view-point of the creditors, owners & the firm itself. The ratio reflects the relative contribution of creditors & owners of business in its financing. A high ratio shows a large share of financing by the creditors of the firm; a low ratio implies a smaller claim of creditors. The D/E ratio indicates the margin of safety to the creditors.
− =
−
=
62494.69 137170 .61
D/E Ratio = 0.45
D/E Ratio 100%
e l t i T s i x A
100% 1
2
3
4
5
Long term debt / Equity
0.45
0.59
0.35
0.32
0.36
Year
2010
2009
2008
2007
2006
60
If the D/E ratio is high, the owners are putting up relatively less money of their own. It is danger signal for the creditors. A high debt- equity ratio has equally serious implications from the firm’s point of view also. A high proportion of debt in the capital structure would lead to inflexibility in the operations of the firm as creditors would exercise pressure & interfere in management. A low debt – equity ratio has just the opposite implications. To the creditors, a relatively high stake of the owners implies sufficient safety margin & substantial protection against shrinkage in assets. From the graph we find that, from the last three years th debt-equity ratio is increasing but this year it was slightly decrease means there is 4.5:5.5 proportion of share.
Sources: Annual Report of Reliance Industries 2008-09-10 from reliance website
www.ril.com www.moneycontrol.com
61
Comparative Analysis of RIL Today Reliance Industries Ltd. Sensex NIFTY
1 Month 1.27%
4.07%
3 Months 9.25%
0.56% 0.64%
11.29% 11.34%
13.37% 13.50%
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
1 Year
3 Years
10.38%
14.08%
17.17% 18.60%
16.06% 20.08%
NIFTY Sensex Reliance Industries Ltd.
Competitive Analysis Companies
Market capitalization (in mn.)
P/E
P/BV
Div(%)
ROA (%)
RONW(%)
ROCE(%)
RIL
3292097.95
18.92
2.33
70%
9.50%
11.80%
13.30%
IOC
1015004.5
32.23
1.42
130%
3.70%
5.80%
9.60%
Essar Oil
180268.06
-47.54
5.67
0
2.90%
-12.50%
4.50%
HPCL
173732.71
-14.1
1.82
120%
5.40%
5.40%
8.80%
38248.3
15.73
1.47
120%
-8%
-13.20%
-9.90%
Chennai petro
62
100% 80%
38248.3 173732.71 180268.06
1.47
1015004.5
1.82
60%
120%
5.67
15.73 40%
120%
0
3292097.95 32.23
1.42
18.92
2.33
20%
8.80%
5.40%
4.50%
2.90% 5.40%
3.70%
130%
5.80% 9.50%
11.80%
13.30%
-12.50%
-9.90%
70%
0% -8%
-47.54
-20%
-13.20%
-14.1
-40%
9.60%
-60%
RIL
IOC
Essar Oil
HPCL
Chennai petro
Competitive Analysis of cash Flow statement : ( in crores )
Net Profit Before Tax Net Cash From Operating Activities
BPCL
Essar Oil
MRPL
IOC
Reliance
Mar '09
Mar '10
Mar '10
Mar '10
Mar '10
12 mths
12 mths
12 mths
12 mths
12 mths
1017.57
28.58
1691.85
14106.09
20547.44
688.65 2723.53 2075.47 1883.33
-464.7
20490.22
4676.1
-18204.5
Net Cash (used in)/from Investing Activities
6212.34
Net Cash (used in)/from Financing Activities
-9908.75
Net (decrease)/increase In Cash and Cash Equivalents
-2285.32
1411.1
-645.22
-3694.23
-10999.6
Opening Cash & Cash Equivalents
-5981.73
24.28
194.98
517.17
-8713.88
Closing Cash & Cash Equivalents
-11139.67
190.7
1761.61
798.02
22176.53
63
Balance Sheet Comparisons : ( in cores ) Balance Sheet
( in crores ) Reliance
IOC
BPCL
Essar Oil
HPCL
Mar '10
Mar '10
Mar '10
Mar '10
Mar '10
Total Share Capital
3,270.37
2,427.95
361.54
1,218.13
339.01
Equity Share Capital
3,270.37
2,427.95
361.54
1,218.13
339.01
Share Application Money
0
0
0
1,153.21
0
Preference Share Capital
0
0
0
0
0
125,095.97
48,124.98
12,725.17
2,302.31
11,218.96
8,804.27
0
0
0
0
137,170.61
50,552.93
13,086.71
4,673.65
11,557.97
Secured Loans
11,670.50
18,292.45
10,443.87
9,470.59
1,375.88
Unsecured Loans
50,824.19
26,273.80
11,751.33
883.14
19,926.49
Total Debt
62,494.69
44,566.25
22,195.20
10,353.73
21,302.37
199,665.30
95,119.18
35,281.91
15,027.38
32,860.34
Reliance
IOC
BPCL
Essar Oil
HPCL
Mar '10
Mar '10
Mar '10
Mar '10
Mar '10
215,864.71
71,780.60
25,412.52
13,802.50
24,988.37
62,604.82
30,199.53
11,743.17
1,493.15
9,681.70
153,259.89
41,581.07
13,669.35
12,309.35
15,306.67
Capital Work in Progress
12,138.82
21,268.63
2,517.75
4,318.75
3,887.59
Investments
19,255.35
22,370.25
12,201.32
203
Inventories
26,981.62
36,404.08
12,028.86
3,969.44
12,579.22
Sundry Debtors
11,660.21
5,799.28
2,662.68
2,033.30
2,437.34
362.36
1,315.11
342.36
1,350.75
243.17
Total Current Assets
39,004.19
43,518.47
15,033.90
7,353.49
15,259.73
Loans and Advances
10,517.57
15,870.43
9,850.04
1,025.94
5,382.21
Fixed Deposits
17,073.56
0
0
0
0
Total CA, Loans & Advances
66,595.32
59,388.90
24,883.94
8,379.43
20,641.94
0
0
0
0
0
48,018.65
39,236.28
15,409.86
10,160.34
16,257.87
3,565.43
10,271.56
2,580.59
22.81
2,105.21
51,584.08
49,507.84
17,990.45
10,183.15
18,363.08
Sources Of Funds
Reserves Revaluation Reserves Networth
Total Liabilities
Application Of Funds Gross Block Less: Accum. Depreciation Net Block
Cash and Bank Balance
Deffered Credit Current Liabilities Provisions Total CL & Provisions
64
11,387.22
Net Current Assets Miscellaneous Expenses Total Assets
Contingent Liabilities Book Value (Rs)
15,011.24
9,881.06
6,893.49
-1,803.72
2,278.86
0
18.17
0
0
0
199,665.30
95,119.18
35,281.91
15,027.38
32,860.34
25,531.21
23,586.81
5,682.54
22,091.84
4,598.74
392.51
208.21
361.97
29.3
341.32
65
Cash Flow of Reliance Industries Particulars
Mar'10
Mar'09
Mar'08
Mar'07
Mar'06
Profit Before Tax Net Cash Flows from Operating Activity Net Cash Used in Investing Activity Net Cash Used in Financing Activity Net Inc/Dec in Cash and Cash Equivalent Cash and Cash Equivalent Beginning of the Year Cash and Equivalent - End of the Year
20,547.44 20,490.22
18,433.23 18,245.86
23,010.14 17,426.74
14,520.47 16,870.55
10,704.06 10,301.58
-18,204.50
-24,084.20
-23,955.08 -18,567.01 -12,130.88
-10,999.60
23,732.58
8,973.04
306.08
366.67
-8,713.88
17,894.24
2,444.70
-1,390.38
-1,462.63
22,176.53
4,282.29
1,835.35
3,225.73
3,608.79
13,462.65
22,176.53
4,280.05
1,835.35
2,146.16
Sources: http://www.moneycontrol.com/financials/relianceindustries/cash-flow/RI 4th january, 2011
Analysis of the cash flow Analysis of 2009-10 follows. (A) Operating activities
Entire cash flows of RIL during 2009-10 have been contributed by operating activates.
This typically indicates a very strong cash position.
RIL had a very high cash inflow on account of provisions for contingencies, sale, and depreciation.
This is indicates high hidden reserves and very favourable cash position.
RIL had a net cash inflow in respect of working capital. This typically indicates an efficient management of working capital
(B) Investing activities:
RIL had a net cash outflow for fixed assets. 66
This indicates RIL is purchasing more fixed assets. In general, this is an indication of expanding business. Fixed assets are income-producing assets, which are expected to produce higher future revenues.
RIL had significant outflow towards investment.
It indicates a favorable cash position.
(C)Financing Activities:
RIL had a substantial net inflow from borrowings. It is, however, not clear whether the inflow was on account of long-term debt or working capital financing. The analyst, therefore, needs to look at the schedules of loans in the balance sheet. Clear disclosure is required to facilitate analysis. (It is on account of working capital as per the schedule.)
RIL’s dividend and dividend tax outflow at Rs.2,219.45 crore against net cash inflow
from operating activities at Rs. 20,490.22 crore is to high-10.83%.
Seen the background of net outflow into fixed assets of Rs.21,829.48 crore only this typically shows that the management has no aggressive growth plans on the anvil, just normal plans.
This typically means that cash inflow from operations in future will have only steady growth, unless the company reverses its policy of aggressive dividend payouts.
RIL’s financing activities reflect a favorable cash position in the sense that there is a net
outflow despite outflow into fixed assets. (D) Quality of cash position:
The information provided by the cash flow statement of RIL appears to indicate a high quality of cash position. The reasons are simple and more than clear. It has been generating cash from operating activities and utilizing this money in expanding it business and paying dividends.
(E) Ability to generate positive cash flow from operations in future:
RIL has generated cash from operations in both the years. The amount, thought increased this year, is more or less the same as last year. Information provided by its cash flow statement establishes its ability to generate steady positive cash flows from operations in future. It appears from this information, and as supported by the balance sheet, that RIL’s debts are not high in comparison to its size. Therefore, it is in a very
comfortable position to meet its obligations towards lenders as well as shareholders 67
Accounting System The accounting system at Reliance Industries Limited is SAP oriented. Each and every transaction is done through SAP. The important Accounting Policies are as under:
The financial statements are prepared under the historical cost convention in accordance with the generally accepted accounting principles in India and the provisions of the Companies Act, 1956. Fixed Assets are stated at cost, less accumulated depreciation including impairment loss. Depreciation on fixed assets is provided on straight line method at the rate prescribed in the Companies Act, 1956. Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Long term investments are stated at cost. Items of inventories are measured at lower of cost or net realizable value. Cost of inventory comprises of all cost of purchase, cost of conversion and other cost incurred in bringing them to their respective present location and condition. By-products are valued at net realizable value. Turnover includes sale of goods, services, excise duty and sales during trial run period. Company’s contribution to provident fund, family pension and gratuity and leave encashment benefits are charged to Profit and Loss Account. Compensation to employees who have opted for retirement under the voluntary retirement scheme of the company is charged off to Profit and Loss Account. Premium on redemption of bonds / debentures are adjusted against the Securities Premium Account. An asset is treated as impaired when the carrying cost assets exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. All the account handling by SAP program, cash management, payment, budget all the items are recorded in SAP program and evaluate.
Communication and coordination Coordination and communication is central to the very existence of organizations. Specific management communication within the organization is necessary for coordination Reliance focuses on building life-long relationships with its stakeholders and believes it is important to understand their concerns and perception. For this it has initiated a sharper and more focused dialogue with key stakeholders, which involved shareholders, customers, suppliers, employees, regulatory authorities, local community, trade unions, NGOs and
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contractors. Acting upon the feedback, it has restructured the processes to address their concerns better and design programmes that would enhance their quality of life. The Board of Directors determines strategic business imperatives and mentors the achievement of reliance corporate goals. It executes its role in corporate governance through regular reviews of Reliance’s financial performance and critical business issues. The quarterly and yearly
financial results are sent to the Stock Exchanges immediately after the Board approves the same. These results are also published in various magazines, newspapers etc In order to provide better communication and coordination Reliance organizes different meetings for the following:
Shareholders –
Annual General Meetings (AGMs)
Shareholders’ grievance meetings
One-to-one meeting
Open forum
Customers
Market Research
External Customer Satisfaction Survey
Employees
Feedback mechanism- 'Employees Suggestion Scheme'
Awards for 'best Case studies' for Internal Learning- 'QUEST', 'Peer Group Sharing'
HSE Committees
'Toolbox Talks'
Self Development Modules ILNA (Individual Learning Needs Assessment)
Career progression / job rotation / role diversification
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Business Dialogue- 'shop floor communication meet'
In-house newsletters
Suppliers
Separate Contractors' Cell
Monthly Contractors' Safety Meetings
Regulatory Authorities
Maintaining and updating all records
Support to local authorities in times of crisis
Supporting neighboring industries through local associations
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Conclusion Indian economy is growing at an impressive rate of over 8% and is likely to continue growing at this rate in the coming years. The growth has also accelerated the energy demand of the country, which has created new opportunities for the company in the ‘Refining and Marketing’ and ‘Exploration and Production’ segments. Further, with the Indian Retail industry expected to grow at a CAGR of 40%, RIL’s foray into retail is likely to provide huge addition to sales volume.
Currently, the company derives close to 98% of its sales revenue from refining and petrochemical segment, but E&P and Retail segments share is expected to increase at a tremendous pace. Reliance’s efficient business model, strong market share across all operating
segments, strong execution capabilities, presence in high growth business areas, and strong fundamentals, all indicate towards potential gains in investor net worth. Based on Seat of the Plant and relative valuation I value RIL at Rs. 2,035 per share for FY10. From the given financial analysis it show that company is will grow its retail and refining tremendously because Mukesh Ambani is more focus on the Backward Vertical Integration by remove the middle man from the business which give higher return in the future, because this two sector are interrelated with its whole business.
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